Sangster has previously supported resolutions around the project while Hawkes' votes historically have been mixed.

The other councillors who voted no were Crs Dean McNamara, Peter Canton, Mark Greening, David Ogilvie, Anne Turley and Dana Wensley.

Those who voted for the draft resolution were mayor Richard Kempthorne, deputy mayor Tim King and Crs Sue Brown, Stuart Bryant, Kit Maling and Trevor Tuffnell.

Hawkes said he had always been in support of the dam as the best option. "I just find it uneconomic."

Sangster said he had been for the project the whole way through because he believed it was the best option for the next 100 years.

However, he had concerns, particularly around the finances, saying he did not believe ratepayers could be asked to provide more funds.

The watershed vote comes after it was revealed in July that updated prices had added about $26m to an estimated $75.9m in capital costs required to complete the project, a funding gap that council staff said could be reduced to $23m because $3m to $3.5m in savings could be made "in some aspects of the design".

Tasman District Council and dam proponent Waimea Irrigators Ltd (WIL) were potential partners in the project for which the council had earmarked $26.8m of capital funding in its Long Term Plan 2018-28.

In order to meet a 51 per cent share of that $23m funding gap, council staff proposed increasing the council's contribution to the joint-venture project by about $11.8m, taking its expected capital costs to $38.6m.

Turley said ratepayers were at their limit, adding she knew of people in Brightwater who were selling up in anticipation of "not being able to pay their rates".

She also raised concerns that "essential infrastructure" projects could be delayed if the dam went ahead.

Ogilvie said $102m was "definitely unaffordable" while McNamara raised concerns about the increasing number of older people in the district on fixed incomes. "I have to asked myself, are they getting a fair deal?"

Canton outlined the rising costs for the council over the years and said he could not support the resolution.

Wensley said if the "dam dies today it is because the negotiations failed" to change the proposed funding model that had the council paying for environmental costs, overruns and providing credit support for WIL.

"We needed to de-risk this for council and that has not happened," she said.

Greening said the community did not support the funding model. "There is no public mandate for this proposal."

Tuffnell moved the resolution and said the council had a responsibility to provide adequate potable water.

"If we have to put some of our other infrastructure back for a while, so be it."

Bryant seconded the motion. "We have to think about the long-term future of the community."

Brown said she believed the risk of climate change had been underestimated and she hoped the project would proceed.

Some councillors pointed out it had been a collaborative project and that a collective approach was needed to tackle the issue of water security.

"It's not ideal," King said. "[But] I'm still convinced that this is the right solution."

Maling said the council would be throwing away millions of dollars in outside funding if it did not proceed with the project.

"We've got one chance to secure this funding."

Kempthorne said under a no-dam scenario, there would be a "critical water shortage", the consequences of which were dire.

"Doing nothing is not an option," he said. "The Plan Bs are much more expensive."

After the vote, Kempthorne said the decision signalled a "significant change" to the direction the council had set through its Long Term Plan 2018-28 and a formal public consultation process would be needed to change the LTP.

Urgent work on an alternative to the dam to secure the urban water supply would need to begin immediately. In the meantime, the "sleeper" no-dam rules in the Tasman Resource Management Plan would be activated and would require "significant water take cuts" by both urban and rural water users on and around the Waimea Plains during extended dry weather until another solution was developed, he said.

Before the meeting started, supporters of the project stood outside the council offices with placards and "Yes" badges. Among them was former former Parliamentary Commissioner for the Environment Dr Morgan Williams who said he had never been involved in community action previously.

Williams said he had stepped up this time after having looked at the dam project with his investigatory and statutory "past hat on".

"This one stacks up," he said.

Long-time orchardist David Easton was also out to show his support of the project.

Minimum flow requirements for the Waimea River meant the status quo with water use could not remain.

"People naively think we can actually continue as we are," Easton said.

During the discussion, councillors asked several questions around the risk of further costs falling on the council.

Wensley asked if more could be done to cap the council's costs.

"We are acutely aware that WIL's risk is capped essentially for overruns but ours is not so you haven't looked at how we could cap our risk even if it means going down that avenue of getting a fixed price."

Engineering services manager Richard Kirby, in the role as acting chief executive, said that debate was had during the process to refine the price for the dam build. "We could reopen that if you want over the next two months."

He suspected if the build cost for the dam was a fixed price "would be more like $85m".

Kempthorne said he had met with Regional Economic Development Minister Shane Jones and had a phone conversation with Economic Development Minister David Parker with regard to a council application for $18m from the Provincial Growth Fund.

"Both of them expressed strong support for the dam," Kempthorne said.

The "indication given to me is that ... we could expect a small contribution".

"My guess, and I didn't talk specific millions because I actually thought it was unhelpful, would be a few million dollars that we could expect to receive that but it was make perfectly clear to me that we should not expect a significant contribution because we asked for $18m," the mayor said. "The indication was given that the responsibility for this dam was now up to the council and they would expect the council to take this on board."

Waimea Irrigators Ltd chairman Murray King was in the council chamber for the discussion and said he was gutted by the vote.

"It's absolutely unfathomable."

The decision of the council did not solve the matter of providing a secure water supply.

"All of the alternatives are more costly and only solve half the problem in so far as they only look after the urban water issues in the short term," King said. "If the opponents were really concerned about rates, they would have taken that into consideration."

King said he would now speak to the board of WIL, which had run its side of the project "on the smell of an oily rag".

"We've put up our own money and guaranteed bank loans so it's not as if irrigators haven't been contributing."

King tipped all of the Government support would now evaporate.

"I just can't understand why you would vote against that $40m-$50m that is coming from central Government by way of low interest and nil interest [loans] and grants," he said. "That you would give that away with so-called concern for ratepayers. It just lacks logic."